Economic theories have been translated into highly-successful policies -- the Kennedy/Johnson supply-side tax cuts, the massive public spending of World War II that helped to end the Great Depression, and so on. These were based on economic theory. They've also been hijacked by the likes of Larry Kudlow, distorted, and used to further his and others' political goals. That's not the fault of the theory. It's the fault of Larry Kudlow and the morons who lap it up.
Comparing economic theory with the Divine Right of Kings is just absurd.
None of what rdf said contradicts economics. Questions about the distribution of wealth -- as it relates to "right" and "wrong" -- don't belong in economic theory. That's politics and philosophy. Markets aren't living beings out to fuck the little guy or the big guy. They're the product of incentives, rules and choices. "The Market" -- and, therefore, economics -- doesn't give a shit about the ecosystem, because it doesn't have its own independent feelings. Its feelings are the population's feelings.
Economics simply takes policies and says, "Here is, roughly, what we should expect to happen, given the circumstances." Questions about morality belong in the political arena.
To determine whether a policy is a failure, you have to ask, "Did the policy do what we thought it would do?" If the policy in (say) Nigeria is to encourage maximum output of oil, regardless of environmental hazards, and maximum output is achieved with horrible environmental consequences, then the policy has still (unfortunately) been a success.
The distortion of economics and economic theory in the political realm is the product of people who are serving their own interests, which is exactly what economics predicts will happen. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
Economics simply takes policies and says, "Here is, roughly, what we should expect to happen, given the circumstances."
Sure, I know you and trust you, so I can ask you and feel equipped. But someone who doesn't might want to do that weird little thing called "second opinion" or "polling a set of experts" or worse "reading the journals."
The real, true, basic problem with "economics" as a discipline is that it has not engaged in fecal aggregation. There are conflicting schools of thought on a wide variety of economic questions. It is not possible to say "economics predicts this rough result" on anything beyond the simplest questions because the academic process has thus far failed to produce a consistent voice/set of answers. And by a consistent voice, I mean a majority opinion that extends enough to actually be detectable by someone who does not have a PhD in the subject.
I've been a social scientist, so I don't expect the rigour and consensus of physics to show in economics, but the field desparately needs to sort it's credibilty out.
But there's also the way GDP, inflation, and stock market indices are used. I mean, as long as we have 3% GDP growth and the stock market is up, there's nothing to worry. And somehow the national statistics manage to keep inflation roughly on target despite double-digit growth rates in energy and real state prices. tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
But there was, I think, a basic consensus among serious academics that, for example, the Bush tax cuts would send the budget plunging back into deficit. That was the line among Keynesians (generally opposed the cuts), Neoclassicalists (supported), Austrians (supported), and even the few serious Supply-Siders (obviously supported), with a few exceptions.
It would, obviously, be absurd to expect the average person to read academic journals. Most people wouldn't understand what the hell was being explained. They have to work and feed their kids. They don't have time to read this stuff.
Even economists who say they reject (say) Keynesian expansionist policies during recessions will tell you that the Fed's policy of cutting and raising rates is critical to keeping the economy on track -- essentially admitting that the theories do work. The Supply-Siders do the same thing on fiscal policy. They'll say, "Keynesian fiscal policy doesn't work, but let's cut taxes on the rich and stimulate the economy," apparently oblivious to the fact that, by saying this, they've conceded the main point. It's the same idea. It's just directed towards a different class of individuals.
There's more of a consensus than people are sometimes led to believe. It's when, for example, Wall Street financial analysts with a strong interest in the outcome -- again, Larry Kudlow -- get involved that we run into a problem, because the media take them seriously on macroeconomic theory. You don't ask a dentist to give you advice on cardiology. Sure, both are related to medicine, but I'm not going to call my dentist someday if, God forbid, I have a heart attack.
That's the real problem, as I see it. And, again, that's more of a political problem, but you're right that it's not wholly divorced from economics. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
but:
Even economists who say they reject (say) Keynesian expansionist policies during recessions will tell you that the Fed's policy of cutting and raising rates is critical to keeping the economy on track -- essentially admitting that the theories do work. The Supply-Siders do the same thing on fiscal policy. They'll say, "Keynesian fiscal policy doesn't work, but let's cut taxes on the rich and stimulate the economy," apparently oblivious to the fact that, by saying this, they've conceded the main point. It's the same idea. It's just directed towards a different class of individuals. There's more of a consensus than people are sometimes led to believe.
There's more of a consensus than people are sometimes led to believe.
There may well be more of a consensus than people are led to believe, but consensus is not a consensus unless people are prepared to defend it.
And that process is not politics, it is what people in old-fashioned disciplines call "academic integrity."
Connected to that, I really feel compelled to ask, is peer review working? It seems as though people like Kudlow, as well as twisting things, can also draw on support from papers published by professors from respected schools in reasonably prestigious journals.
It's not my intention to be attacking you personally, Drew. Reading this I realise it sounds pretty heated. Please understand, I get passionate about this because it involves so much that is important. Academic integrity, the economics used to govern all our lives and the politics that rules us.
Right, but it's the articles that they're twisting. Kudlow is typically found twisting Arthur Laffer's work. He can draw on support from Kennedy's tax cuts to say that Supply-Side economics does work, at least in some cases (and the consensus seems to be that it did back then). Most economists I know of believe that the basic concept is true -- that there is a point at which revenue is maximized. But the vast majority of economists, I think, will tell you that America is well to the left of the curve.
The easiest way the show that Kudlow is an idiot is to simply look at the data, which bonddad at Daily Kos has outlined on several occasions (to the point that I think he's beating a dead horse). This tells you all you need to know:
Tax revenue from individual tax payers was 994 [billion] in 2001 and 927 billion in 2005 - a 6.7% decrease.
Despite the economy being hundreds of billions of dollars larger today than in 2001, revenue from income taxes in 2001, prior to the implementing of the cuts, was higher in raw dollars than it is today. (The Laffer Curve contends that, if rates are on the right side of the curve, a tax cut will lead to higher revenue, in raw dollars, thanks to higher growth due to changes in behavior.) From that, it's fairly plain to see that we're on the left side of the curve. I believe the data comes from the Congressional Budget Office.
Wchurchill is the guy to talk to about Laffer, since I think he mentioned having studied under him at Chicago. I trust that he'll correct any mischaracterization.
So, to answer your question, yes, I do think peer review works. It's obviously far from perfect, as all human-created things are, and one problem is that there are any number of academic journals to publish in, so even the ideologues can find a place to rant. Peer review, mainly from Milton Friedman, led to the demise of the Phillips Curve in the policy world, which played a major role in stagflation during the '70s, for example.
I didn't find it heated at all, and your comments are always respectful and insightful. So no offense taken or intended. I love talking about this stuff, and it's an easy subject to get passionate about, given its importance in our everyday lives -- especially when the crazies have the power.
Anyway, I'm off to a party to a "black and white" party tonight (whatever that is), so I have to go and argue with my fiancee about what I'm going to wear, because I'm (apparently) too fucking stupid to pick out a dress shirt to wear with a suit. ;) She's still mad at me for wearing a pinstriped shirt with pinstriped pants to her graduation ceremony -- a big no-no for everyone but the British and the Italians (or so I'm told). So all apologies for delayed responses. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
This may be what economists ask, and what politicians may even beat their chests about, but it is not the proper question to ask if economic theory and principles are intended to serve the entire society rather than just the few, who might be trying to manipulate it.
The proper question is: economic growth for whom?
If the Fed had a way of solving these sorts of moral problems, I'd say, "Well, then let the Fed handle it instead of Congress." Because I'd much rather have our little gang of elite economists and bankers deal with it than politicians. But, then again, that would open the door to making the Fed a highly-politicized organization, which would, unquestionably, be dangerous for the American economy.
The Fed only works because we trust it to simply do its job, and, while the chairman and board do give their opinions on policy issues from time to time, they generally won't whole-heartedly endorse anything, precisely because of a fear of losing confidence. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
